Strategic Management
The balanced scorecard and strategy map approach can be useful tools for determining business strategy. As you read, consider the strategy map used for Mayberry Utilities Company. Do you think this strategy map is missing any potential perspectives? As you read this resource, pay special attention to the corporate strategy map provided in This text. Do you see how you might be able to use a mind map to determine your strategy? This corporate strategy mind map also addresses the internal and external perspectives you learned about in Unit 2.
What is Strategy?
A strategy is a plan of action designed to achieve a specific goal or series of goals within an organizational framework.
Learning Objective
- Define strategy within the context of a business and their organizational goals
Key Points
- Strategic management is the process of building capabilities that allow a firm to create value for customers, shareholders, and society while operating in competitive markets.
- Strategy entails: specifying the organization's mission, vision, and objectives; developing policies and plans to execute the vision; and allocating resources to implement those policies and plans.
- Strategy is largely about using internal assets to create a value-added proposition. This helps to capture opportunities in the competitive environment while avoiding threats.
- Experts in the field of strategy define the potential components of strategy and the different forms strategy can take.
Terms
- balanced scorecard: A strategic performance management tool used by managers to track the execution of activities within their control and monitor the consequences of these actions.
- strategic management: The art and science of formulating, implementing, and evaluating cross-functional decisions that will enable an organization to achieve its objectives.
- strategy: A plan of action intended to accomplish a specific goal.
Strategy involves the action plan of a company for building competitive advantage and increasing its triple bottom line over the long-term. The action plan relates to achieving the economic, social, and environmental performance objectives; in essence, it helps bridge the gap between the long-term vision and short-term decisions.
Strategic Management
Strategic management is the process of building capabilities that allow a firm to create value for customers, shareholders, and society while operating in competitive markets. It entails the analysis of internal and external environments of firms to maximize the use of resources in relation to objectives. Strategic management can depend upon the size of an organization and the proclivity to change the organization's business environment.
The process of strategic management entails:
- Specifying the organization's mission, vision, and objectives
- Developing policies and plans that are designed to achieve these objectives
- Allocating resources to implement these policies and plans
As an example, let's take a company that wants to expand its current operations to producing widgets. The company's strategy may involve analyzing the widget industry along with other businesses producing widgets. Through this analysis, the company can develop a goal for how to enter the market while differentiating from competitors' products. It could then establish a plan to determine if the approach is successful.
Keeping ScoreA balanced scorecard is a tool sometimes used to evaluate a business's overall performance. From the executive level, the primary starting point will be stakeholder needs and expectations (i.e., financiers, customers, owners, etc.). Following this, inputs such as objectives, operations, and internal processes will be developed to achieve these expectations. Another way to keep score of a strategy is to visualize it using a strategy map. Strategy maps help to illustrate how various goals are linked and provide trajectories for achieving these goals.
Strategy map: This image is an example of a strategy map for a public-sector organization. It shows how various goals are linked and providing trajectories for achieving these goals. |
|---|
Common Approaches to Strategy
Richard Rumelt
In 2011, Professor Richard P. Rumelt described strategy as a type of problem solving. He outlined a perspective on the components of strategy, which include:
- Diagnosis: What is the problem being addressed? How do the mission and objectives imply action?
- Guiding Policy: What framework will be used to approach the operations? (This, in many ways, should be the decision of a given competitive advantage relative to the competition.)
- Action Plans: What will the operations look like (in detail)? How will the processes be enacted to align with the guiding policy and address the issue in the diagnosis?
Michael Porter
In 1980, Michael Porter wrote that formulation of competitive strategy includes the consideration of four key elements:
- Company strengths and weaknesses
- Personal values of the key implementers (i.e., management or the board)
- Industry opportunities and threats
- Broader societal expectations
Henry Mintzberg
Henry Mintzberg stated that there are prescriptive approaches (what should be) and descriptive approaches (what is) to strategic management. Prescriptive schools are "one size fits all" approaches that designate best practices, while descriptive schools describe how strategy is implemented in specific contexts. No single strategic managerial method dominates, and the choice between managerial styles remains a subjective and context-dependent process. As a result, Mintzberg hypothesized five strategic types:
- Strategy as plan: a directed course of action to achieve an intended set of goals; similar to the strategic planning concept
- Strategy as pattern: a consistent pattern of past behavior with a strategy realized over time rather than planned or intended (where the realized pattern was different from the intent, Mintzberg referred to the strategy as emergent)
- Strategy as position: locating brands, products, or companies within the market based on the conceptual framework of consumers or other stakeholders; a strategy determined primarily by factors outside the firm
- Strategy as ploy: a specific maneuver intended to outwit a competitor
- Strategy as perspective: executing strategy based on a "theory of the business" or a natural extension of the mindset or ideological perspective of the organization
Example
A company wants to expand its current operations to produce widgets. The company's strategy may involve analyzing the widget industry along with other businesses producing widgets. Through this analysis, the company can develop a goal for how to enter the market while differentiating from competitors' products. It could then establish a plan to determine if the approach is successful.
Source: Boundless, https://www.coursehero.com/study-guides/boundless-management/strategic-management/
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 License.